Bill Schuette: Charities see only 35 cents for each dollar raised

Michigan charities are collecting an average of only thirty-five cents for every dollar raised by professional fundraisers soliciting donations in Michigan, according to Michigan Attorney General Bill Schuette.

"Michigan citizens have generous hearts and deserve to know how much of their donation actually makes it to their intended charity, especially in these times when every dollar makes a difference," said Schuette. "Donors might be surprised to know that, on average, only thirty-five cents of each dollar collected through professional fundraisers are passed on to the charity."

“This new report will hold professional fundraisers accountable and make charities more transparent, so donors can do as much good as possible."

Under Michigan law, a professional fundraiser is defined as a person or organization that solicits contributions on behalf of a charity in exchange for compensation. This is different from a charity that hires its own staff member for development and other fundraising activities.

Michigan law requires professional fundraisers to submit the results of their campaigns to the Attorney General. The data includes the type of appeal conducted (mail, telephone, etc.), gross receipts raised, the amount paid to the fundraiser, and the final amount and percentage that went to the charity. Any charity fundraising in Michigan is required to report these results, so the Professional Fundraising Charitable Solicitation Report includes data from charities across the country. The report includes the results of fundraising campaigns reported to the Attorney General during the 2012 calendar year.

Although hiring professional fundraisers and fundraising counsel may benefit certain charities, some professional fundraisers leave little of the donations for the intended charity. According to data aggregated in the Attorney General’s Report, on average, professional fundraisers pocket 65% of funds raised.

According to the Better Business Bureau’s Standards for Charity Accountability, charities should “spend no more than 35% of related contributions on fund raising. Related contributions include donations, legacies, and other gifts received as a result of fund raising efforts.”

Schuette noted that states are limited in their ability to pass laws to regulate professional fundraisers’ solicited contributions. The U.S. Supreme Court ruled unconstitutional state laws requiring that a minimum percentage of each donation go to charity in Illinois ex rel. Madigan v. Telemarketing Assocs., 538 U.S. 600 (2003). As a result, states are limited to passing laws that prohibit fraudulent fundraising practices and require reporting from charities and their professional fundraisers. Michigan law addresses both aspects.

Schuette added that examples of fraudulent fundraising practices prohibited by Michigan law include: (1) falsely telling a donor that he or she gave six months ago and it’s time to give again, or (2) falsely telling a donors that 90% of their donations go to the charity, when that is in fact not true.

To improve transparency and provide donors greater access to this important information, Schuette enhanced the Attorney General’s online charity search feature to include professional fundraiser data. The Attorney General’s annual Professional Fundraising Charitable Solicitation Report provides a year-end compilation of data, while the online charity search feature provides campaign information as it is filed throughout the year.

The online charity search is designed as a central resource for prospective donors to perform general searches for various types of registered charities. For instance, donors may search by key words within the organization’s purpose, as well as by city, county, state, name, or any combination of these. Inquiring prospective donors can visit www.michigan.gov/AGCharitySearch.